Brother Wristwatch and Grandpa Wen: Chinese Kleptocracy

Two days after Americans go to the polls, China will embark with great fanfare on its own leadership transition, anointing a new generation of men—and they almost certainly will all be men—to run the country for the next ten years. A team of seven, the Standing Committee of the Politburo of the Chinese Communist Party, will intone their official priorities for the new term: economic rebalancing, technological innovation, and territorial integrity, among other things. There is one issue that they will not emphasize, but it is more essential to their Party’s survival than any other: combatting corruption.

On Thursday, just twenty-one days before the solemn handover, the Times lobbed the news equivalent of a hand grenade into the affair: a forty-seven-hundred-word investigation revealing that the family of outgoing Prime Minister Wen Jiabao has amassed $2.7 billion in assets during his time in office. The news of the nest egg—which is large enough to rank the Wen clan alongside the Marriotts on the Forbes list of richest families—strikes an especially awkward blow because Wen, nicknamed Grandpa Wen for his attentions to the poor, had put himself forward as one of the Party’s moral standard-bearers. The story does not accuse him outright of corruption; it documents a culture of self-dealing and enrichment. The government promptly blacked out the Times Web site; Bloomberg has been blocked for more than four months, since publishing a report on the assets of the incoming President Xi Jinping.

Blacking out the Times is beside the point. To understand the threat that corruption has come to pose to the Party, the Chinese need look no further than their own newspapers.

It is one of the curious facts of China today that the state press both marches in step with the Communist Party and also devotes much of its space to documenting acts of epic plunder and abuses of power. The latest scandal centers on an a man who has come to be known in China as “Uncle House.” He is an obscure fifty-six-year-old apparatchik named Cai Bin, a senior urban-management official and political commissar from the southern province of Guangdong who was sacked this week after investigators found that he had somehow acquired twenty-two homes, worth an estimated six million dollars. With an official salary of less than twenty-thousand dollars a year, Cai was found to be a prolific taker of bribes, according to the state press. Cai Bin’s many houses were initially turned up by Chinese Web users, who elevated the case into a national joke and left authorities with no choice but to take action.

Uncle House comes just a few weeks after “Brother Wristwatch,” a.k.a. Yang Dacai, the former head of the Work Safety Administration in the province of Shaanxi. He was fired after Web users noticed a photograph of him at the site of a deadly bus crash. The photo initially attracted criticism because he was smiling beside the wreckage, but the accusations swiftly evolved from callousness to corruption after people zoomed in on his watch, and compared it to other publicly available photos that showed Yang had a handsome collection of at least eleven ultra-high-end timepieces, including a five-thousand-dollar Montblanc and a ten-thousand-dollar Omega. (Yang maintained that he purchased them all with legally earned income.)

There is nothing inherently unique about the fact that China’s rise has been accompanied by enormous official theft. (In “Boss Rail,” a piece in the magazine last week, I examined the culture of corruption in China’s largest public-works project, as well as the corruption that shadowed America’s rise in the nineteenth century.) What is unique, however, and potentially harmful to political stability, is the nature of the corruption in China. In a new book, “The Double Paradox,” the sinologist Andrew Wedeman examines a raft of data on arrests, bribes, and prosecutions not only in China but in other countries with high rates of corruption such as Zaire, Nicaragua, and Haiti—as well as places with high growth such as Korea and Taiwan. “Although there is no good corruption,” Wedeman writes, “there is clearly bad and worse corruption: the corruption that has negative effects, and the corruption that can have potentially catastrophic effects.” The science of kleptocracy separates the behavior into two basic types: “developmental corruption” of the kind we see in Korea and Taiwan, which does not ultimately prevent the economy from recovering, and “degenerative corruption” of the kind that ruined the economies in Zaire and Haiti.

When investors and diplomats consider the risks facing China, they often assume that its corruption is of the kind we saw in Korea and Taiwan (or Chicago, for that matter), in which a political machine pulls money out of the state to give to favored friends and businesses, but does not ultimately kill the goose that laid the golden egg. But when Wedeman looked at the data, he concluded, to his surprise, that “corruption in China more closely resembled corruption in Zaire than it did corruption in Japan.” In short, he found, “the evidence suggests that corruption in contemporary China is essentially anarchy.”

If you spend time looking through Chinese cases of corruption, you can’t help but be impressed with its creative range. Take, for instance, the group of executives who commissioned the National Symphony Orchestra to play a composition written by a powerful stock-market regulator who fancied himself a composer. In another case, a real-estate developer paid a hundred and fifty thousand dollars for two paintings by a local official with artistic aspirations. The pieces were later appraised to be worth about one-hundredth of what he paid.

In simplest terms, the degree to which a country can outgrow corruption hinges in part on what I might call the Swiss Factor: How much of the money ends up in Switzerland (directly, in the case of bank accounts, or indirectly, in the case of wristwatches), and how much is re-injected into the domestic economy, once it is dissected and digested by crony capitalists. In the twenty or so years since corruption began to balloon in the early nineteen-nineties, China has battled it largely by the threat of severe punishment. Every year the government indicts somewhere in the neighborhood of twenty-five hundred senior officials, and they can be treated harshly; in one five-year stretch, it handed down three hundred and fifty death sentences for bribery, graft, and embezzlement. “At a very basic level,” Wedeman found, “it appears to have prevented corruption from spiraling out of control.” (Other analysts are unconvinced; Minxin Pei, a professor of government at Claremont McKenna College, contend that despite “draconian punishments, such as lengthy jail terms and death sentences, tens of thousands of officials continue to embezzle and extort.”)

By all accounts, China today has a growing Swiss Factor. Uncle House, like many other accused officials, was found to have family abroad, some with Australian citizenship, a condition that makes it easier for them to flee if he gets in trouble. (Official records indicate that eighteen thousand corrupt officials have fled the country since 1990, taking with them a hundred and twenty billion dollars.)

China’s new leaders are under pressure to staunch the flow of money. In the recent announcement of charges against Bo Xilai, the former member Politburo member purged in a spectacular murder-and-bribery scandal this spring, analysts were surprised that the Party explicitly acknowledged the scale of bribes that Bo is accused of taking during his time as a public servant—a “change in strategy” that “may reflect a new consensus among the leadership that it must do something serious to regain public confidence in anti-corruption measures,” according to Cheng Li of the Brookings Institution. “Party leaders will likely announce a new, stronger mechanism to combat official corruption at the upcoming 18th Party Congress”—which begins November 8th—“which could explain their willingness to make these kinds of charges against a former colleague.”

The most substantive measure they might take would be to require public officials to declare their assets, an idea that has been gaining favor among Chinese commentators in recent years. China had nearly ten million public servants, but local experiments to make them own up to what they own have failed. “No experiment that discloses the assets of junior officials but allows senior officials to continue keeping their assets secret can really expect to gain enough credibility and support to be sustainable,” Yiyi Lu, an expert on Chinese civil society, wrote recently. “If the party is genuinely prepared to embrace reform and openness, then disclosure of officials’ assets must start from those in the most senior positions.”

The Party is running out of time not because corruption is a drag on the economy—it can outrun that effect—but because the public is losing confidence. Last year, when two trains crashed on a stretch of China’s new railways, citizens were not inclined to see it as an example of the inevitable problems that accompany an ambitious new improvement to public transportation. Instead, they circulated an anonymous message that read, in part: “When a country is so corrupt that one lightning strike can cause a train crash … none of us are exempt. China today is a train rushing through a lightning storm…. We are all passengers.”

Evan Osnos joined The New Yorker as a staff writer in 2008, and covers politics and foreign affairs.